An International Arbitration Practice That Spans The Globe

Sunday, April 22, 2012 - 13:18

The Editor interviews Arif Hyder Ali, Co-Chair of Weil, Gotshal & Manges LLP’s International Arbitration Practice and Partner based in Washington, DC.

Editor: Please tell our readers about your distinguished background and your practice.

Ali: I am originally from Bangladesh, grew up in Southeast Asia and North Africa, went to high school in London and then attended college and law school in New York. I come from a family of lawyers, so practicing law internationally was pretty much all I ever wanted to do. I currently co-chair the international arbitration practice group at Weil, having previously been a partner at Crowell & Moring LLP in Washington, DC, where I established and led the firm’s international arbitration practice for five years. Prior to that I was a partner at Fulbright & Jaworski where I established a similar practice. Before joining Fulbright, I was a section chief at the United Nations Compensation Commission, which was dealing with all of the claims against Iraq arising out of the 1990 invasion of Kuwait, and senior counsel at the World Intellectual Property Organization in Geneva, Switzerland, where I helped set up the WIPO Arbitration and Mediation Center.

In my entire career of 22 years, I have pretty much specialized in international dispute resolution, claims commission work and international arbitration. I am among a generation of lawyers worldwide who saw international arbitration as a specialty practice, and have pursued that specialization ever since law school. My first exposure to international arbitration came when I worked with Professor Andreas F. Lowenfeld at NYU Law School, one of the giants in the field of international arbitration in the U.S. and internationally.

My practice involves representing private parties in cross-border disputes, representing private parties against sovereign governments and representing governments when they have been sued by foreign investors or in state-to-state dispute resolution. I have appeared before tribunals under the arbitral rules of all of the major institutions and have also appeared before the International Court of Justice. In fact, as a result of my involvement in representing the Kingdom of Bahrain in its border dispute with Qatar before the Court, I was decorated with the Order of Bahrain. I have represented clients in international arbitrations in more than 40 countries, under different governing laws, and in disputes relating to a broad range of industries, including information technology and the Internet, oil and gas, energy, hospitality, mining and construction. I also teach international arbitration at Georgetown University’s law school.

Editor: Please describe the firm’s international arbitration practice and your goals for this practice.

Ali: Weil has been involved in international arbitration globally for decades. The firm’s reputation, its global footprint and its relationships with leading companies worldwide has resulted in the firm being consistently retained, across all of our 21 offices, for high-value, bet-the-company disputes covering a range of industries and under all of the major arbitral rules. The firm’s goal is to be among the top five firms in the world in international arbitration in all of its different manifestations, whether it is patent, construction, state-to-state, investor-to-state or commercial arbitration. This is why the firm brought my group in from Crowell and has focused on international arbitration as a strategic component of its continuing globalization strategy. No international firm can service its clients in the way that it needs to without having a developed capability in the area of international arbitration. Our hope is that we will be able to leverage the platform that Weil offers to put in place a multicultural, multilingual, multijurisdictional and multidimensional team of lawyers who are able to practice under any legal system, in any industry sector and in any part of the world. We believe that our relentless focus on client service, lawyering excellence, trial capabilities and budgetary management is unparalleled and will fast make us one of the top practices globally in the international arbitration space.

Editor: Has globalization caused cross-border disputes to increase in number and complexity?

Ali: Yes, very much so. With increasing cross-border flows of money, technology and people, you not only have a greater interaction of business cultures but also a greater clash of legal cultures. The kind of investments going into developing regions and economies, often without an evolved legal system, gives rise to disputes. We also have increasing worldwide regulatory reform – for example, governments seeking to nationalize energy and natural resource companies or using their taxing power to impair the return on investment. There are also commercial disputes where parties try to avoid contractual obligations because economic circumstances have changed or the contract is no longer economic. With increased global economic activity, there will be greater interaction of commerce across borders, giving rise to disputes. If you look at the statistics of all the major arbitral institutions, we have seen phenomenal growth, not only with the International Chamber of Commerce, the London Court of International Arbitration or the American Arbitration Association, but also in regional dispute resolution centers like the Cairo Regional Center for International Commercial Arbitration, the Hong Kong International Arbitration Center and the Mexican Chamber of Commerce. This growth is really across the board.

Editor: What usually triggers the decision to arbitrate?

Ali: It depends. You have to break down the situations generically into international commercial arbitration and investor-state arbitration. Taking the commercial arbitration category, there might be a desire to send a message to a contracting counterparty that it can’t stop payment at will. There may also be a desire to get out of a bad contract, such as a change in business strategy that may have precipitated an exit strategy. The variety of reasons for arbitration in the commercial context is limitless.

In the investor-state context, where for example, a foreign investor is building a toll road, or an oil and gas or mining company has a concession, the host government may decide that it is going to change its policy, or implement regulatory reforms that have an adverse effect on the foreign investor’s investments in the country. For example, when you enter into a mining concession where you have exploration and then exploitation phases, these are huge capital investments over one, two or three years with a return in 15 to 20 years, and in that period of time, there are host country political dynamics that can change, inevitably impacting the foreign investor’s operations in that country. When this happens, it can trigger the need for arbitration. Other triggers we’ve seen include a host state’s desire for renegotiation of a contract or its imposition of a windfall profits tax. Companies are looking to protect their investments. They want to leverage the various treaties that give them international protections, including international arbitration.

Editor: Why do so many agreements relating to M&A and other international transactions specify that disputes will be settled by ADR?

Ali: The perception is that the international arbitral structure as it currently exists affords a level playing field. Where there is a three-member tribunal, parties have the ability to choose at least one of the decision makers. Those decision makers are typically going to be impartial, independent and neutral. There is not another legal system providing binding dispute resolution where parties may choose at least one member of the tribunal. Arbitrators are sophisticated and have an understanding of international commerce, sometimes even industry expertise. Generally speaking, arbitration is quicker and cheaper than litigation, and it offers a neutral governing law and a neutral forum.

Editor: Is a mediation the first step provided in such agreements?

Ali: Not necessarily. Seven to ten years ago mediation was very much in vogue and remains a very effective tool for resolving certain kinds of disputes. It was not uncommon to see multi-tiered dispute resolution clauses where mediation was a mandatory first step before proceeding to arbitration. But, mediation will only succeed if both parties willingly participate, and it is always available even when arbitration has been commenced. In fact, I have found that mediation is most effective once the dispute has crystallized. When each side has gained more focus on the real issues and the vulnerabilities of each side as well as the potential liability, there is a better environment to mediate a settlement. The problem with mediation at the outset of the dispute is that people generally do not know enough at that stage, and emotions are also running high.

Often the people deciding on whether to commence arbitration are not the people who are going to be most involved in a mediated settlement, which is effectively a commercial settlement.

Editor: Are the venues and other details relating to ADR specified in the documents relating to such transactions?

Ali: If you have a well-drafted arbitration clause, it should specify the number of arbitrators, the governing law, the place of arbitration and, very importantly, the arbitral institution, and it should invoke its rules with precision. Otherwise, you end up with what is known as a “pathological clause,” where either the arbitral institution or the arbitrators will have to decide elements of the dispute resolution framework that have not been agreed to in the parties’ dispute resolution clause. The majority of clauses that we come across are well drafted and specify those key elements. In the absence of party agreement providing for arbitration, the dispute will have to be resolved in court.

Editor: How frequently is the decision made to use arbitration to resolve an international dispute as a result of early case assessment?

Ali: Early case assessment is a process that I would consider to be pre-dispute resolution in the sense that one is examining quite objectively the morphology of the circumstances giving rise to the dispute. At Weil, we have developed a system that we discuss with clients to give them a very objective evaluation of a case early on, so that settlement and litigation strategies can be developed based on an objective assessment of the strengths and weaknesses of the dispute before positions have hardened.  For us, early case assessment involves relying on your experience and typically using multi-disciplinary teams made up of damage experts, technical experts and corporate M&A lawyers to bring various disciplines to evaluate the dispute. Knowing which particular things to consider in order to provide such objective analysis enables us to tell a client that they really should or should not be bringing a matter to arbitration. Placing the client’s interest ahead of all others requires the attorney to be brutally honest in the case of early case assessment.

Editor: Would you discuss the extent to which a decision to arbitrate is based on perceived weaknesses in the court systems?

Ali: Weaknesses can be those of the legal system or those of the decision maker. The decision to arbitrate is driven by the neutrality of the arbitrators as well as by the length of time a case can take in the court system with interlocutory appeals and appeals on final judgments. The judicial systems are not as efficient in other parts of the world as they are in the U.S. or the UK, but even in the U.S. and the UK it can take ages to get to a final determination, thus producing more out-of-court settlements. Arbitration gets you to the final decision more quickly than does litigation.

Editor: What problems do you encounter in enforcing arbitration decisions?

Ali: Simply put, a losing party that does not want to pay hides assets, tries to get the tribunal’s award set aside or otherwise tries to resist enforcement. But courts around the world are getting more sophisticated in enforcing arbitral obligations under the various treaties that are in place for the recognition and enforcement of arbitral awards, and they are increasingly becoming more limited in their tolerance of efforts to avoid award compliance. Enforcing awards against sovereign governments continues to be a major problem, however. We have just been through an exercise where we are representing a very large Wall Street bank and its efforts to enforce an award against the government of Argentina. We have tried political advocacy, international trade sanctions and typical litigation tactics to entice the sovereign to the negotiating table. If a government says it is not going to pay, they don’t have to pay, or they simply won’t pay. On the other hand, there are governments that, if approached in the right way and if the settlement is structured in the right way, will resolve the dispute outside of a dispute resolution framework.


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